The fiscal
picture of state governments has been grim since the Great Recession. In
total, states have seen budget shortfalls of nearly $600 billion since fiscal
2009 and have been forced to make spending cuts in an attempt to bridge the
funding gap. As shown on these two graphs, state and particularly local governments have shed a total of 697,000 jobs since
their peaks in 2008:

By way of
comparison, the Federal government has seen the number of its
employees rise by 57,000 over the same time frame as shown here:

Odd, isn't it?

The Ryan
budget would shift costs to the state and local level by doing the following:

1.) Cutting
Medicaid Funding: The Ryan Budget would cut federal funding for the
federal - state Medicaid program by 34 percent by 2022 and by larger amounts in
later years compared to current law.

2.) Cutting
non-Defense "Discretionary" Funding: The Ryan Budget would cut
non-entitlement funding by 22 percent in 2014 and later years on top of Budget
Control Act (BCA) spending caps. About one-third of discretionary funding
is given to state and local governments to pay for services including
education, law enforcement, disaster response, housing, public health care
services and water treatment. On top of BCA cuts, the Ryan Budget cuts
would amount to nearly $28 billion in 2014, adding up to $247 billion between
2013 and 2021.

The Ryan
budget cuts would reduce discretionary state and local grants to an estimated
0.6 percent of GDP by 2021, less than half the average of the past 35 years as
shown on this graph:

Lastly, here
is a chart showing how the estimated cuts in discretionary grants under the
Ryan Budget will impact the federal discretionary grants that each state receives between 2013 and
2021:

State and
local governments would be forced to make up this cost shifting by either
cutting services or raising revenue simply because politically paralyzed Washington would rather achieve a
semblance of fiscal balance through spending cuts rather than revenue
increases. Shifting the costs of services from one level of government to another is not saving anyone anything, however, it may make those in Congress feel positively heroic. Either way, taxpayers are going to pay. You'll just be
making out your check to a different payee.

1 comment:

Like Ryan, this commentary misses larger issues. Ryan cannot credibly reduce the budget deficit without solving the trade deficit. The trade deficit leads to higher unemployment, more government spending and a higher budget deficit. Ryan's positions on free trade allow unbalanced trade and trade deficits. The federal deficit is a lagging indicator of the trade deficit.

The article also misses larger finance and banking issues. The amount of money in circulation is a result of borrowing. And, if loans are paid off, the amount of money decreases, resulting in less economic activity. Milton Friedman knew this intimately, but didn't have the stones to propose a replacement for fractional reserve banking (see Positive Money UK's website for a solution). But, concerning Ryan, until Ryan studies these issues and understands them well, any budget policies he recommends will not have the affect on the economy that he thinks they will.

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About Me

I have been an avid follower of the world's political and economic scene since the great gold rush of 1979 - 1980 when it seemed that the world's economic system was on the verge of collapse. I am most concerned about the mounting level of government debt and the lack of political will to solve the problem. Actions need to be taken sooner rather than later when demographic issues will make solutions far more difficult. As a geoscientist, I am also concerned about the world's energy future; as we reach peak cheap oil, we need to find viable long-term solutions to what will ultimately become a supply-demand imbalance.